The health care and health insurance dilemma in the United States penetrates and corrodes the very core of the quality of the American life. Our politicians and legislators are falling all over each other to produce both State and Federally mandated solutions for one of the most expensive problem facing our nation today. Documentaries such as “Sicko” with Michael Moore, and countless television stories and newspaper articles scream the need for change. As the never-ending inflation of medical services and prescription drugs rises, the bureaucracy of the insurance providers keeps pace by increasing premiums, and lowering quality of coverage for most Americans in their health plans. Drug companies are under constant scrutiny to offer more competitive pricing, but face little regulation compared to the foreign countries who have elected to impose cost controls endemic to their individual society’s perceived needs.
So in the face of such a negative equation, how does a capital-driven society like the United States of America re-vamp its health care system, and still maintain the theology of “choice” and “capital market competition”? And how do we do it without killing more Americans?
To answer these questions it is necessary to take in to account what works and what doesn’t in both American society and other societies where socialized medicine is the norm. The problem that Uncle Sam and many self-made American business folks have with socialized programs is the ability of such programs to denigrate a societies progress, and step away from our independent roots, both financially and health-wise. In order to continue to allow health insurance providers to shore up their billions of investment dollars ( a key pillar in our financial framework) and still take care of every American who is sick requires us to radically change the way the risk of such health problems is transferred, but to still collect regular premiums from taxpayers to fund the collective system. My proposed solution will be spelled out in this article in relatively simple terms forming a base architecture which will allow independent insurance providers to remain, independent hospitals and doctors to remain independent, and drug companies to remain competitively profitable while still insuring every American.
I would propose a three-tiered system for Health Insurance, Prescription Drugs, and Medical Providers of all types:
I. Insurance Method
In order to keep insurance companies profitable and provide 100% base health coverage to all Americans at the same time, you need a combination of the net effect of socialized medicine and American free trade. A fund must be created by the federal government which closely mimics a Re-Insurance Company. Most insurance companies whether in the health field or commercial insurers have large re-insurance agreements and policies with major funds. A classic example is Berkshire Hathaway’s “General RE” which underwrites some of the largest global policies in the world in their niche. For description purposes, the federal government needs to take the opposite approach of a non-profit, heavily taxed medicare and insurance system by creating the world’s largest re-insurance vehicle. The re-insurance department is funded by A) a percentage of all health care premiums from all health insurance companies, and B) a 1.5% federal income tax increase across the board for all Americans. From this point forward, all health insurance providers are required to have a BASE INSURANCE LEVEL on all policies which will include a) full prescription coverage included, b) all doctor visits covered, and c) full major medical coverage with no deductible.
From an actuarial standpoint, what you are doing is not eliminating health insurance premiums for Americans. All working Americans who earn more than $16,000.00 per year must pay a scale-adjusted premium of the same category and type for the “base policy”. The scale for premium is driven by total income per individual or household based on their current employment. However, you have just turned the entire insurance industry in to one big “group plan” where the risk is spread out over the entire country. Using the proportion of healthy Americans to those requiring services at any given point, this simplistic approach lowers the premium for the base policy to affordable levels for all wage earners, and gives the base policy for free to low income individuals and families. Those people who meet the low income standards get the same base insurance as everybody else, and are required to file with a private insurance company of their choice for insurance. The federal RE fund pays all insurers a minimum base amount equivalent to what they would get from a paying client. The “Federal RE” model receives 30 to 35% of the private insurance company’s base premiums for all policies. The base premiums and the amount each individual must pay is determined by an actuarial committee of the new federal RE fund, but should be adjusted very rarely. Once the percentage is set, it becomes law, and the 1.5% tax increase across the board is primarily a cushion for the low income and poor.
Insurance companies then endeavor to differentiate themselves by adding features to the base policy for their clients for their marketing and packaging. They do NOT differentiate themselves by providing sub-standard insurance, as it is not optional. The base policy for all is a major medical insurance policy based on California Standards, and covers all co-pays and deductibles 100%. In order to make additional insured dollars, the health insurer must provide more elite services to guarantee a client who is willing to pay for additional features an even better position than the base position. This enables the following to occur in logical order:
* The federal government actually makes money on investing insurance premiums the way insurance companies do by their re-insurance department. Risk is spread out over each American that can afford to pay premiums. Premiums are minimal because of the inflated group size and reduced insurance company risk. The combination of a small federal tax increase to hedge dollar volume and beef up the account combines with receiving the RE premiums and investing them makes this federal program slightly profitable, and with the ability to adjust policy when needed.
* Insurance companies Rig-associates lower their risk, and are able to simplify and streamline their base coverage for major medical. Since all rules apply to all insurers (new or old) they can compete based on important but “ancillary” products to improve the insurance quality of those that can afford extra benefits. Major payouts will be largely reduced due to automatic RE participation on the policy’s base components.